China GDP talk boosts FTSE to 1-week closing high

Britain's top share index hit a one-week closing high on Thursday as mining stocks jumped on market talk that China, the world's biggest metals consumer, could report strong economic growth numbers on Friday.

Economists polled by Reuters in March forecast that China's gross domestic product expanded 8.3 percent in the first quarter of 2012 versus a year earlier. But several traders cited market talk of a 9 percent rise, prompting investors to snap up equities.

The UK mining index climbed 3.1 percent, extending its recent rally, also helped by firmer copper prices, which rose further above technical support at $8,000 a tonne as worries over the global economic outlook eased.

This speculation (on Chinese GDP growth) helped to increase near term demand for stocks whilst U.S. trade data also boosted risk appetite, said Joshua Raymond, Chief Market Strategist at City Index.

The U.S. trade deficit narrowed unexpectedly in February as exports hit a record high, imports from China and other key suppliers declined and oil import volume fell to the lowest in 15 years.

A stronger than expected reading in Chinese GDP data would be hugely important for calming fears of a sharp slowdown in global growth. And considering much of the FTSE 100's prospects are weighted in the performance of heavyweight mining stocks, the reading will play a strong role in how the FTSE 100 opens tomorrow morning.

POSITIVE NEAR-TERM OUTLOOK

UK banks were also in demand, with a fall in Italian bond yields after clearing its latest round of auctions improving sentiment towards the financial sector. The banking sector suffered heavily last year as many banks were highly exposed to debt-laden peripheral euro zone economies.

Banks rose 2.2 percent, while Barclays was up 5.4 percent. Lloyds gained 4.3 percent as New British banking venture NBNK made a fresh bid for 632 Lloyds bank branches.

Charts showed positive signals in the near term, especially after the FTSE 100 bounced back on Wednesday from a support level of 5,570, which provided a floor in January.

The index is set for a rebound. Its 9-day RSI (relative strength index) fell into the oversold zone yesterday and coincided with the support level, said Julian McCormack, technical analyst at Brewin Dolphin.

However, Michael Jarman, chief market strategist at H2O Markets, remained cautious and said the rally in share prices was just a short-term technical bounce and due to encouraging U.S. trade balance deficit figures.

I'm still fairly defensive and expect any short term moves to be short-lived.

Its shares were also supported by a 49 percent jump in British aerospace parts supplier Umeco Plc after specialty chemicals maker Cytec Industries Inc said it had made an offer valued at about $439 million for Umeco.

Aggreko gained 3.1 percent as the world's biggest temporary power provider said underlying revenue had risen by more than 20 percent in the first three months of the year, putting it on track for further growth in 2012. Aggreko's trading volume was 2.5 times its 90-day daily average.

Royal Dutch Shell recovered to end 0.8 percent lower after steep losses earlier in the session after the company said a sheen discovered in the water near its offshore Gulf of Mexico oil wells was estimated to total about six barrels of oil and that its facilities showed no signs of leaks.